Powerchip posts record Q3 profit prfits

OPTIMISM The firm's chairman said that solid demand ahead of Vista's launch and the limited supply of DRAM chips should make for another record-breaking quarter in Q4

By Lisa Wang / STAFF REPORTER

Powerchip Semiconductor Corp (力晶半導體), the nation's largest maker of memory chips for computers, yesterday said that third-quarter net income set an all-time high and it expected the growth momentum to extend into the current quarter.

Net income last quarter more than tripled to NT$7.79 billion (US$234 million), or NT$1.29 per share, during the July-September period, compared with NT$2.27 billion, or NT$0.41 per share, a year ago.

Powerchip attributed the significant growth to better prices for dynamic random access memory (DRAM) chips ahead of the launch of Microsoft Corp's Vista operating system for corporations next month and for consumers in January, as well as the estimated 15 percent sequential expansion in output.

Spot prices of the benchmark 512-megabit DRAM chip rose 20 percent during the third quarter, according to Taipei-based market researcher DRAMeXchange.

"The fourth quarter should be a positive period for the DRAM industry because of limited new supply, only from Powerchip. And the demand may grow in view of Vista," Huang said.

To better support the new operating system, computer makers had to double the computer's memory storage capacity, Huang said.

DRAM spot prices may hold steady at around US$5.5 per unit, Huang predicted.

Building on that optimism, Huang said that monthly sales during the fourth quarter could remain at the same record level of NT$10.4 billion reached last month on the back of rising output and better yields.

In other words, Powerchip could post another record quarter with total revenues reaching NT$30 billion in the last quarter of the year, up 20 percent from third quarter's historical high.

Output would grow another 18 percent sequentially in the fourth quarter and yield would improve by 3 percent to 5 percent, the company said.

Huang added that demand should remain solid, while supply would be limited.

To expand capacity as fast as possible in order to safeguard the company's market position, Powerchip would spend as much as it did this year on new equipment, Huang said.

The chipmaker plans to invest NT$85 billion on new equipment this year.

Based on Huang's outlook, "Powerchip may post even better results this quarter," said Wang Wanli (王萬里), who tracks the memory chip industry for Credit Suisse First Boston in Taipei.

"But, Vista will be the key," Wang said.

Another delay in the launch of Vista could deal a serious blow to DRAM prices and thereby their profits, Wang said.

Wang gave an "outperform" rating on Powerchip, citing cheap valuations.